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Should We Be Worried?

1:08 PM, May 30, 2014 • By GEOFFREY NORMAN
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Yesterday’s GDP report was treated – by the administrations and its supporters in and out of the media – as an outlier.  A good number would have been 3 percent growth, which is what the experts at places like Goldman Sachs had been predicting back when the quarter was still young and hopes were high.  Then, the first report from the Commerce Department had the economy treading water, barely, at 0.1 percent growth.  Prior to the revision released yesterday by Commerce, expectations were for a negative number in the half of a percent range.

It came in at negative one percent.

And was quickly shrugged off as an anomaly.  Fault of the weather.  Too cold for commerce ... by a full four percent.  Interesting to speculate on just what the reaction would have been if this had occurred during a Romney administration.  But, of course, that is a dead-end trail. And, who knows, maybe it was just the weather. Maybe the number for this quarter will blow the door off its hinges. 

But … maybe not.

This morning’s disappointment comes, as Shobhana Chandra  of Bloomberg reports, in the form of:

Household purchases, which account for about 70 percent of the economy, [dropping]  0.1 percent, the first decrease in a year, after a revised 1 percent gain the prior month that was the strongest reading since August 2009.

The decline was, of course, unexpected and it will be hard to make a case that it was caused by the weather.  

And there are other troubling signs that the 1st quarter may not have been, strictly, a cold-weather contraction.

As Ben Casselman of 538 writes:

… while the first quarter’s weakness may prove temporary, that doesn’t mean it was a fluke. Thursday’s report also provided a first look at gross domestic income, an alternative measure of the economy based on income rather than spending. It showed an even faster 2.3 percent rate of contraction. Meanwhile, the housing market has been slowing down, worrying Federal Reserve Chairwoman Janet Yellen and other policymakers. Thursday’s report isn’t a reason to panic, but it is another piece of evidence that the economy remains far from fully healed.

And, as Heidi Moore at the Guardian points out:

… with incomes down, housing suffering, and businesses still wary of hiring, it’s not clear where ... growth will come from.

But the weather is much nicer. There is that.

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